Future of Iraq: The Spoils of War

How the West will make a killing on Iraqi oil riches

by Danny Fortson, Andrew Murray-Watson and Tim Webb

Iraq's massive oil reserves, the third-largest in the world, are about to be
thrown open for large-scale exploitation by Western oil companies under a
controversial law which is expected to come before the Iraqi parliament
within days.

The US government has been involved in drawing up the law, a draft of which
has been seen by The Independent on Sunday. It would give big oil companies
such as BP, Shell and Exxon 30-year contracts to extract Iraqi crude and
allow the first large-scale operation of foreign oil interests in the
country since the industry was nationalised in 1972.

The huge potential prizes for Western firms will give ammunition to critics
who say the Iraq war was fought for oil. They point to statements such as
one from Vice-President Dick Cheney, who said in 1999, while he was still
chief executive of the oil services company Halliburton, that the world
would need an additional 50 million barrels of oil a day by 2010. "So where
is the oil going to come from?... The Middle East, with two-thirds of the
world's oil and the lowest cost, is still where the prize ultimately lies,"
he said.

Oil industry executives and analysts say the law, which would permit Western
companies to pocket up to three-quarters of profits in the early years, is
the only way to get Iraq's oil industry back on its feet after years of
sanctions, war and loss of expertise. But it will operate through
"production-sharing agreements" (or PSAs) which are highly unusual in the
Middle East, where the oil industry in Saudi Arabia and Iran, the world's
two largest producers, is state controlled.

Opponents say Iraq, where oil accounts for 95 per cent of the economy, is
being forced to surrender an unacceptable degree of sovereignty.

Proposing the parliamentary motion for war in 2003, Tony Blair denied the
"false claim" that "we want to seize" Iraq's oil revenues. He said the money
should be put into a trust fund, run by the UN, for the Iraqis, but the idea
came to nothing. The same year Colin Powell, then Secretary of State, said:
"It cost a great deal of money to prosecute this war. But the oil of the
Iraqi people belongs to the Iraqi people; it is their wealth, it will be
used for their benefit. So we did not do it for oil." . . .